25 February 2008 / by Joy Tibbs

House prices continue to fall in England and Wales, but demand has increased according to property research provider Hometrack.

Hometrack's latest house price survey shows that house prices fell for the fifth consecutive month in February, with average prices down 0.2 per cent. Meanwhile, annual growth slipped to just 1.4 per cent, the lowest rate of growth since April 2006.

However, it appears that the credit crunch may be loosening its grip on the housing market as demand appears to have risen in February. New buyer interest was up for the first time since last summer and the higher number of sales also contributed to the small month-on-month growth in demand.

Director of research, Richard Donnell, says: "In the wake of the credit crunch, demand for housing fell by 45 percent, but the latest Hometrack survey shows a small yet important turnaround in demand over February."

Unsurprisingly, the areas showing the greatest increase in buyer registrations were London (+13 per cent) and the South East (+10 per cent) compared with January figures. Despite this, growth was much lower in February than in the same month in previous years.

Furthermore, the rise in new buyers registering with agents for February (+7.9 per cent) was far below levels expected levels for the time of year. The average increase over the last three years, at 25 per cent, is almost three times higher than the increase recorded in February 2008.

According to Hometrack, house price growth in recent years has been supported by a lack of available sale property compared with level of demand. So, while supply over the three-year period rose 16 per cent, average demand was 25 per cent. However, this year, demand and supply have been fairly even, which has caused the downturn in price growth.

The report predicts that the extent of house price declines will slow in the near future with demand continuing to rise, lower mortgages and greater consumer confidence in tact.

"A small but growing number of buyers appear ready to dip their toes in the market again but any upward pressure on prices is likely to remain limited for the foreseeable future," says Mr Donnell.